Strategic Planning of BMW’s Global Production Network

A car manufacturer’s decisions on investing in production capacity are critical. A

great part of the capacity is product specific, for example, the assembly lines for bodies.
The installed capacity must be sufficient for the whole life cycle of the product, six to
eight years, because expanding capacity later is very expensive. On the other hand, low
utilization of capacity threatens the profitability of the product. Although the time to
market for new products has dropped remarkably, it still takes several years from the
investment decision to start serial production. Thus, a firm’s decisions on very large
capital investments affect its competitiveness for the next 10 years. A car
manufacturer’s situation for strategic planning is complicated by market trends, currently
the market’s increasing dynamics and globalization of the supply chain, including sales
markets, production sites, and suppliers.

Competition forces car manufacturers to launch new car models frequently to

provide new functions for customers, new concepts, such as sports activity vehicles,
new materials, such as aluminium, and future electronic components, such as dynamic
stability control (DSC) or BMW’s integrated driving system, I-Drive. Customers want
individual configuration, particularly for premium cars. Besides the classical markets in
Europe, North America, and Japan, new markets are emerging, such as Eastern
Europe and China. The product life cycles in these new markets are likely to be different
from those in the established markets. Possibly, manufacturers can sell discontinued
models in new markets. Locating production sites throughout the globe brings
production closer to such markets, permitting firms to benefit from the individual
advantages of certain countries, for example, investment incentives and low costs for
labor.

We focus on this third planning step. Originally, planners performed this step
manually using Excel sheets that expressed the load and the capacity per plant as the
number of cars produced per day and the number producible per day summed up over
all products. They transformed the resulting load plans for all the plants into diagrams.
Planners’ allocation of products to plants was restricted for technical reasons, by the
personnel skills available at every location, and because of general policy. For only a
few products were there alternative production locations, from which planners either
made an appropriate choice or tried each one. They had a further degree of freedom for
“split products,” those produced at two or more plants, for which they decided the
volume to be produced at each plant, usually to utilize the plants properly.

We improved long haul burden planning, a fundamental venture in BMW's key

strategic process, by extending it to an indispensable perspective on the worldwide
production network. The new model improves the distribution of items to creation
destinations and interests in extra limit, considering corporate-approach confinements.
The model makes the arranging procedure more straightforward, and it has been
acknowledged by the numerous offices concerned, which give the fundamental
information. We demonstrated activities in the inventory network also, money streams in
proper detail to incorporate the fundamental impacts of item portion choices and to
allow improvement with a standard MIP solver. The improvement model produces
burden plans for different situations rapidly. It decreases arranging exertion and enables
organizers to research different situations more regularly than they could before. All
things considered, the model incredibly improves the choice help for BMW's general
vital arranging. In view of our initial trial of the new model, we can sensibly anticipate a
decrease in ventures and expenses for materials, generation, and dispersion of around
five to seven percent. BMW plans to imbed the new MIP model in a graphical UI, which
still should be created. Organizers with little learning of tasks research will at that point
have the option to utilize the model.

References:
 Henrich, P., Ferber, S., & Fleischmann, B. (n.d.). Strategic Planning of BMW’s
Global Production Network. Retrieved from
https://sites.math.washington.edu/~billey/classes/honors.350/articles/Week.6.pdf.